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BEVERAGE CANS Ups and downs An analyst’s view

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In the United States, 100 billion aluminum beverage cans are consumed each year, half of the worldwide total of 200 billion cans.

The U.S. market has been flat since peaking in 1999, according to Subodh K. Das, director of the Center for Aluminum Technology at the University of Kentucky, but during the same period the world aluminum packaging market grew rapidly, mainly in emerging markets in Asia and Eastern Europe. China's aluminum beverage can market is seeing double-digit growth, and in the next year is expected to exceed 10 billion cans, he said.

To stimulate any sort of growth in the North American market, can makers will have to put forth new offerings. "Innovative products are needed to meet a variety of market needs," Das said. "Great progress has been made, such as the shaped aluminum bottle and the specialty can." Such new designs have become the favorite of emerging products, such as energy drinks, and even bottled water.

The U.S. consumer soft drink market declined by 0.6 percent in 2006, according to Beverage Digest. Excluding energy drinks, however, the market would be down some 1.5 percent, highlighting the emerging product's importance to the future of specialty aluminum beverage cans.

Aluminum prices have definitely taken their toll on aluminum beverage canning operations. HSBC Securities Inc. analyst Lauren Torres noted that Bill Douglass, chief financial officer of Atlanta-based Coca-Cola Enterprises (CCE), the largest Coke bottler, discussed the company's exposure to aluminum prices. Douglass was reported to have said that as CCE makes the transition to market pricing in 2007, it is looking at double-digit percentage price increases if aluminum prices remain at current levels, which could translate to a 9-percent increase in the cost of goods sold this year in North America.

Douglass also was reported to have said that CCE faced some potential pricing risk because the company hasn't covered its aluminum needs for the fourth quarter of 2007.

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